FTC to Bloggers: Tell the Truth and Disclose

If you’re a blogger and have been near Twitter lately, you have probably heard by now that the Federal Trade Commission has amended its regulations on deceptive advertising [PDF], and that these amendments target bloggers who endorse and/or review products. Here is an overview of the FTC’s authority and an outline of the changes to the regulation.

The FTC and Its Authority

Under the Federal Trade Commission Act (“FTC Act”), 15 U.S.C. §§ 41-58, the Federal Trade Commission can, inter alia, (a) prevent unfair methods of competition, and unfair or deceptive acts or practices in or affecting commerce; (b) seek monetary redress and other relief for conduct injurious to consumers; (c) prescribe trade regulation rules defining with specificity acts or practices that are unfair or deceptive, and establishing requirements designed to prevent such acts or practices; (d) conduct investigations relating to the organization, business, practices, and management of entities engaged in commerce; and (e) make reports and legislative recommendations to Congress.

The New Guidelines

As part of preventing “unfair methods of competition, and unfair or deceptive acts or practices in or affecting commerce,” and “prescribe[ing] trade regulation rules,” the FTC recently issued an amendment to 16 CFR 255 “Guides Concerning Use of Endorsements and Testimonials in Advertising.” According to the amended regulation, the “Guides provide the basis for voluntary compliance with the law by advertisers and endorsers. Practices inconsistent with these Guides may result in corrective action by the Commission under Section 5 [of the FTC Act; 15 U.S.C. § 45] if, after investigation, the Commission has reason to believe that the practices fall within the scope of conduct declared unlawful by the statute.” 16 CFR 255.0(a).

That is, the FTC cannot “correct” just any violation of the rules in the Guide – the specific behavior of that blogger must also be something prohibited by Section 5. That said, Section 5 provides that “Unfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce, are hereby declared unlawful.” 15 U.S.C. 45(a)(1). The Guides, then, give examples to show when endorsements and testimonials constitute “unfair methods of competition” or “unfair or deceptive acts or practices.” If a blogger (or anyone) acts contrary to the examples given in the Guide, and the FTC determines that the action is indeed an unfair practice, the existence of the Guide gives the FTC grounds to allege that the violation was “knowing.” Under Section 5, the FTC may sue a party who violates the Act if the party had “actual knowledge or knowledge fairly implied” that the party’s action was “unfair.” 15 U.S.C. 45(m)(1)(A). There is a maximum civil penalty of $10,000 for each violation.

The Bottom Line (in the Middle)

So, what do the Guides say not to do? If you endorse a product or service, don’t lie; if an advertiser pays you somehow, and your audience wouldn’t reasonably expect you to be paid, clearly and conspicuously display your disclosure.

Endorsements

What is an endorsement? Any advertising message that consumers are likely to believe reflects the opinions or experiences of a party other than the sponsoring advertiser even if the views expressed by that party are identical to those of the sponsoring advertiser. This second part, starting with the “even if” is new to the Guides, and tells you that when Doritos has paid you, you are “endorsing” Doritos even if you would have been singing the praises of Cool Ranch regardless of sponsorship. According to the FTC, an “endorsement” and a “testimonial” are the same thing, so don’t try to avoid the Doritos-pays-me disclaimer (which must be “clear and conspicuous) by indicating you were merely giving a “testimonial.” Now, if you just happened to buy Doritos (and received nothing from them, except perhaps a generalized coupon in the mail) and wanted to sing their praises, go for it!

When you endorse a product or service, you must be honest about your opinion and experience, and you can’t say anything that, if the advertiser said it, would be in violation of the FTC Act. (So, if you are endorsing Doritos, you can’t say “when I ate the off-brand flavored tortilla chips, my hair fell out – but when I ate Doritos, it grew back and I lost 10 pounds!”)(unless that’s true)(and if it is, let me know). Also, you must have actually used the product/service before writing the endorsement. (So open up those chips first!)

Experts Have a Higher Obligation

If you are an expert on the topic that the product/service is related to, you must not only be honest, but you must also be ready to change your endorsement if, before sending it out, you find out something about the product that contradicts your endorsement. To call yourself an “expert,” however, you must in fact have expertise about what you are saying. So, if you say you are a “snack chip expert” and you discuss Doritos, you must have some qualifications (PhD in snack chip studies, worked in the recipe department of a snack chip firm for 10 years, etc) that relate to snack chips. You must use your knowledge when reviewing the product/service, in addition to other information you happen to learn.

Disclosure

When are you required to disclose that you have received payment from an advertiser/seller? Whenever there is a connection between you and the seller that “might materially affect the weight or credibility of the endorsement.” That is, if the audience would not reasonably expect that there is a connection, you must disclose one when it exists. If your audience knows you work for Doritos, you may not need to disclose that again when writing your pro-Cool Ranch post (although you may want to), but if your audience doesn’t know you work for them and you write that piece, you need to disclose. The same is true if you were writing in the Comments section of someone else’s blog with an endorsement of the chips, or if you were posting to a message board. Since your relationships to Doritos is “material” to the weight or credibility of your endorsement, disclosure is necessary.

Always More to the Story

Back in July, Derek Bambauer posed the question as to whether Section 230 of the Communications Decency Act (47 U.S.C. 230) might protect bloggers from FTC actions. Over at Mediactive, Dan Gillmor calls the amendments a “dangerous federal intervention in social media” and provides a pretty thorough critique of the changes. It will be interesting to see whether the FTC uses the guidelines to even-handedly prevent advertisers from masking as bloggers while still allowing real bloggers the ability to write with freedom.

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The purpose of this blog is to shed some light on the legal aspects of stories in the news. Nothing written on this blog should be construed as legal advice. All comments will be publicly viewable, so please do not post confidential information. If you believe you have a legal issue, contact an attorney in your state.